Implementation of the Services Directive: a partnership for new growth in services 2012-2015 – Frequently Asked Questions

1. What exactly is the 'services package'?

The 'services package' is the set of actions that the Commission is proposing to stimulate growth in the services sector. The package is made up of a policy paper, which sets out specific proposals designed to release the growth potential of the services sector. The Communication is accompanied by three Commission Staff Working Documents, containing detailed analyses of several aspects of the services sector:

The Communication is accompanied by three staff working documents:

- The report on the implementation of the Services Directive, which presents the state of implementation of the Directive and remaining problems and of the ''Points of Single Contact'' with a section dedicated to individual Member State assessment. It is complemented by the economic assessment showing the effects and the growth potential of the Services Directive in terms of EU with data for each Member State.

- The results of the performance check which show how well different EU rules are applied to businesses on a day-to-day basis. It identified a number of obstacles for businesses wishing to expand to other EU countries, which the Commission is working to remedy.

- The staff working document with a view to establishing guidance on the application of Article 20(2) on the principle of non-discrimination of service recipientson the basis of nationality or country of residence. The document explores the reasons behind such business behaviour and calls for an end to discriminatory practices when it is not justified.

The package comes in response to Article 41 of the Services Directive, which calls for a comprehensive report on the application of the Directive.

2. Why is the European Commission adopting the 'services package'?

The services sector is the driving force of the EU economy. The Services Directive itself covers services accounting for 45% of EU GDP. A properly functioning Single Market for services is vital not only for the services market itself but also for the overall performance of the economy. Administrative and legal barriers continue to hinder growth in the services sector. To improve the situation, the Services Directive was adopted in 2006 and had to be implemented in all Member States by the end of 2009. In adopting the 'services package', the Commission is taking stock of how much progress has been achieved so far by the Member States in removing unnecessary legal and administrative barriers. It also identifies the restrictions that have not yet been abolished and proposes measures to make the single market for services work better in order to stimulate growth.

The most recent economic assessment of the implementation of the Services Directive shows that it brings significant economic benefits in terms of GDP growth, something which is indispensable at a time when there is an increasing need to identify sources of new growth. Further measures are needed to fully realise the objectives of the Services Directive and deliver a well-functioning Single Market for services, one which benefits businesses and consumers alike.

Most of the studies evaluating the potential impact of the Services Directive were carried out before the Directive was actually implemented. They all concluded that considerable economic gains could be achieved because of the Services Directive. However, none of the studies so far has used data from after the implementation of the Services Directive. The study on the economic impact of the Services Directive carried out by the Commission is therefore the first study assessing the economic impact of the Services Directive, as it has been actually implemented by the Member States. The estimated economic impact is a 0.8% increase in GDP at EU level over a ten year period, with the impact varying between Member States (from below 0.4% in Bulgaria, Romania, Malta, Austria, Slovenia to about 1% in Greece, UK, France, Sweden, Luxembourg, Spain and Cyprus). This is assumed to be a conservative estimate.

However, additional gains could still be made if Member States were to increase their level of ambition in implementation of the Directive. Indeed under an ambitious scenario, in which all Member States approached the average level of the five best countries in terms of barriers per sector (which is close to the elimination of all restrictions covered by the Services Directive) the economic impact could reach a 2.6% increase in GDP, 1.8% higher than the current estimate (ranging from over 2.7% for France, Sweden, Austria, Denmark, Netherlands Luxembourg, UK, Spain and Cyprus and less than 2% for Finland, Czech Republic, Slovenia, Hungary, Poland, Lithuania, Bulgaria, Slovakia, and Romania).

It is worth noting that, even in less ambitious scenarios where Member States approach the EU average level of restrictions per sector, the additional gains in EU GDP would still be substantial, amounting to an extra 0.4% of GDP on top of the current estimated 0.8%, bringing a total increase of 1.2% of EU GDP.

The figures below show the impact on GDP of the Services Directive (in %, over a ten year period). The bottom section of the bars (yellow for individual Member States and blue for EU27 and euro area) represents the effects of actual implementation; the top part of the bars (orange and red) represents the potential additional impact (orange for improved implementation and red for an ambitious scenario close to full elimination of restrictions). It clearly shows that all Member States stand to gain additional GDP if they progress with reforms in their services sectors.

The study carried out by the Commission services has also assessed the economic effects of the “Points of Single Contact” [PSCs], using a different methodology. It shows that setting up national PSCs has a significant economic impact. Concretely, a conservative approximation based on how much the procedural burden of starting up a service activity is reduced, the economy-wide impact of the PSCs is estimated at around 0.13% of GDP, while an additional impact of further procedural streamlining in Member States could reach up to 0.15% of GDP in the medium run (5-year horizon) and up to 0.21% of GDP in the long run.

5. What is the state of implementation of the Services Directive?

All Member States have communicated to the Commission at this stage that they have transposed the Directive into their national laws. A great deal of work has been done by Member States to adapt their legislative frameworks to the requirements of the Services Directive.

A first assessment of the implementation of the Directive was presented in the mutual evaluation report in 2011. The report on the implementation of the Services Directive accompanying the Communication published today aims to summarise the main achievement of the implementation by focusing on some key provisions of the Directive and identifying what remains to be done. The implementation report shows that national legislation still contains requirements prohibited by the Services Directive, which should be eliminated by Member States as a matter of priority.

Certain problems have been identified with the so-called “tacit approval procedure”, which is an important means of cutting red tape for businesses as it stipulates that, if the authority does not answer within the specified time limit, authorisation is deemed to have been granted. It ensures that applications are treated within the legally prescribed timeframe. In addition, and with a view to facilitating service provisions, the Services Directive lays down that authorisations granted should be valid for the entire territory of the country, and not only specific parts, unless a limitation in scope is justified by overriding reasons of general interest. The Commission's analysis shows that doubts about the conformity of legislation with this principle remain in two Member States (the UK and Belgium).

The report also explores areas where Members States could have been more ambitious when screening their national legislation and deciding whether to keep, modify or completely abolish certain requirements. In many instances requirements have been abolished or made less stringent but too often Member States have chosen to maintain the status quo. This concerns in particular the provisions where the Services Directive gives a degree of discretion to Member States, such as those concerning quantitative and territorial restrictions, legal form and shareholding requirements and the obligation to apply fixed, minimum or maximum tariffs. For instance, Austria, Germany, Italy, Poland, Portugal and Spain (and many more) have restrictions on legal form and ownership in a number of professional services, fixed tariffs for professional services have been maintained , for instance, in Bulgaria, Cyprus, Germany, Poland, Slovakia, Slovenia and Sweden.

Finally, it appears that the implementation of the freedom to provide services clause, one of the most important principles for the Single Market for services, is not yet delivering its full potential. This clause guarantees that service providers wanting to provide cross-border services in another Member State would not be obliged to comply with all the requirements of that Member State (as they already have to comply with the requirements in their home country). Although implemented in all Member States, it is not always clear in sector-specific regulations which rules apply to the incoming service providers. Therefore Member States should undertake to implement this clause by stating clearly which requirements apply to incoming service providers from other Member States.

To conclude, a lot has been achieved, but more work still needs to be done.

6. What measures are the Commission planning to take against the Member States that have not fully or correctly transposed the Directive?

The Member States have done a great deal of work to implement the Services Directive and all Member States have finalised the adoption of their implementing legislation. More than a thousand acts of implementation have already been adopted, including several "omnibus laws" containing amendments to dozens of individual laws.Hundreds of discriminatory, unjustified or disproportionate requirements were abolished in strategic service sectors such as business services, construction, tourism and retail.

In many Member States implementation is still deficient. The Commission has identified a significant number of requirements forbidden by the Services Directive such as rules discriminating on the basis of nationality or residence, obliging service providers to carry out "economic needs tests" or involving competing operators in the decisions of competent authorities. The Commission will pay particular attention to the enforcement of these prohibitions and will initiate infringement procedures where necessary in particular in those sectors that offer the greatest growth potential for the EU economy (business services, construction, tourism and retail).

7. Is the Commission proposing to extend the scope of the Services Directive?

The current scope of the Services Directive already covers a broad range of services. Most of the services that are outside its remit are already subject to sector-specific legislation. Other sectors, e.g. gambling, are being carefully examined. Our priority is to make sure that the sectors that are covered by the Services Directive benefit in full from its correct implementation and therefore more needs to be done by Member States to ensure that this is the case. The Commission is proposing actions to help deliver the full potential of the Services Directive.

8. How does the Commission propose to release the full potential of the services market?

With the "services package", the Commission is putting forward concrete and ambitious actions. In particular, it proposes the following measures:

1. Apply a "zero tolerance" policy with regard to any instances of non-compliance with key provisions of the Services Directive in key sectors (business services, construction, tourism and retail), especially those provisions that unequivocally require the Member States to abolish forbidden requirements. Where necessary the Commission will open infringement procedures.

2. Maximize the economic effect of the Services Directive:

The Commission will work with Member States to open up those areas where there are further economic gains to be achieved (e.g. requirements on legal form and capital ownership, freedom to provide cross-border services).

Priority actions that Member States need to take to enhance growth in the services market will be reflected in country-specific recommendations in the context of the European semester for 2013.

Member States should step up efforts to enhance the use of the IMI (Internal Market Information System) with the Commission's support.

The Commission will also encourage the development of voluntary measures by the insurance sector to provide for the adequate insurance coverage in particular for cross-border service providers. Progress will be assessed by the Commission by the end of 2013.

3. Modernise the regulatory framework for professional services:

Work in this regard has already commenced under the umbrella of the presentation of a proposal for the modernisation of the Professional Qualifications Directive. More information on the content of this proposal can be found here (see IP/11/1562 and MEMO/11/923).

4. Ensure the Services Directive works for consumers:

The Commission will work with Member States to make sure that the provision of non-discrimination of service recipients by businesses is properly enforced.

The Commission will work with businesses to improve transparency and support efforts to make sure that customers can shop cross-border.

The Commission will carry out awareness-raising actions for consumers to clarify their rights in this regard.

5. Make sure Internal Market rules work on the ground:

Member States should commit themselves to making their legislation and procedures fully compliant with the Professional Qualifications and E-Commerce Directives,

The Commission will enforce these Directives, with the focus on their combined application and when necessary will resort to infringement procedures.

6. Address sector specific needs:

In specific sectors ensure that the mutual recognition principle works in practice and promote the alignment of technical standards.

In retail and business services specific initiatives will be proposed further to the adoption of the European Retail Action Plan and the outcome of the High-Level Group on Business Related Services to be created in 2012.

7. Points of Single Contact (see also questions 13 & 14):

Member States should make them fully compliant with the Services Directive.

Member States should develop the second generation of the PSCs (covering all procedures of a business lifecycle, be multilingual and more user-friendly) by the end of 2014, the common criteria for which will be established in the form of a “PSC Charter”.

The Commission will launch a communication campaign on PSCs in 2013.

9. Which Member States still retain requirements based on residence or nationality and in which cases are they applied?

Requirements based on nationality and residency are the most burdensome of all as they make it impossible for anyone coming from another country to set up a business in another Member State or, in the case of a company, to have its registered office in that Member State. These requirements must be removed as a matter of priority. Examples of these kinds of requirements can still be found in e.g.:

Greece - a nationality requirement in the private education sector as well as in the retail sector where a prior two-year residence requirement has been abolished but for obtaining licences, priority is granted to specific categories of people with Greek nationality (e.g. Greek Romas and repatriated Greeks from North Epirus and Pontus).

Italy - residence within the region where the service is provided is required for ski instructors in some regions;

Lithuania - residence requirement for providers of formal vocational training who are natural persons from other Member States;

Malta - residence requirement for patent agents;

Poland - a driving school can only be operated by an entrepreneur whose seat or place of residence is in Poland;

Sweden - patent agents have to be domiciled in Sweden in order to be entitled to receive documents, also residency requirements have been maintained for car rental services.

10. Who will benefit from a better functioning services market?

Both businesses and consumers will benefit. Businesses will benefit from clear and non-discriminatory rules, making it easier to set up a business in any EU country or to provide services on a temporary basis in other Member States. Well-functioning Points of Single Contact will serve as an important source of information about applicable requirements and will allow for their online completion, regardless of where in the EU the business is located. It is crucial for SMEs, which frequently lack resources to deal with red tape or to hire extra staff or external companies to address procedures and formalities. Less-regulated services will provide for more competition in the services sector. Services markets are important sources of job creation and more competitive and open regulatory frameworks should deliver valuable economic growth and jobs.

This will benefit not only businesses but also consumers who will have a greater choice of providers and lower prices for many products and services.

11. How do consumers benefit from the Services Directive?

Consumers expect to be able to buy products and services on the market regardless of where they live within the EU. This is one of the benefits of the Single Market. The Services Directive helps consumers by removing regulatory barriers that hamper access to services in other Member States. Information that businesses and Member States are obliged to provide should also help consumers make better informed choices when buying services in other Member States.

Consumers increasingly think outside their national borders and actively seek the best offers available in the Single Market. This is particularly the case for Internet users and mobile citizens. However consumers sometimes encounter difficulties when trying to buy cross-border: businesses sometimes charge a higher price because the buyer lives in another Member State, or even refuse to sell at all.

Article 20(2) of the Services Directive prohibits discrimination against service recipients on the basis of their nationality or country of residence. The purpose of this provision is to put an end to practices by businesses that unjustifiably hamper access to their services by residents in other Member States.

Consumers should generally not be faced with differences of treatment due to their nationality or residence. However, Article 20(2) of the Services Directive makes it clear that if the service provider can provide objective reasons for different treatment, it will not be considered discrimination. Businesses may have valid reasons for refusing to trade or for applying different conditions and this is why the non-discrimination clause requires a case-by-case analysis.

The Staff Working Document with a view to establishing guidance on the application of Article 20(2) of the Services Directive provides initial clarifications on the non-discrimination clause on the basis of information gathered so far. The Commission is proposing to work further on the application of this provision with national bodies responsible for enforcing the clause and dealing with consumers’ complaints and with business representatives.

It is important to note that businesses may choose to focus on building a customer base in their local or national market. But at the same time, they should be encouraged to “think European” and fully exploit opportunities the internal market offers. Businesses are urged to put an end to unjustified obstacles for service recipients wanting to buy services from providers established in other Member States.

12. What are the examples of discrimination faced by consumers that can be considered difficult to justify?

Consumers moving to the territory of another Member State to receive a service, such as tourists or students, should not be confronted with different conditions of access to services on ground of their nationality or residence. Situations of this type have been identified in relation to theme parks and other tourist attractions which exclude nationals or residents in another Member State from advantageous entrance fees.

In the online world recipients are sometimes automatically redirected to websites offering considerably higher prices. This price differentiation is difficult to justify in this case as the costs for the service provision for the service are the same regardless of the country of residence of the consumer. In the past these practices have been identified in sectors like car rental.

Moreover consumers should not face higher charges than would be imposed for a domestic transaction when they wish to pay for a service provided in another Member State by credit transfer or direct debit. Drivers who use motorways in other Member States on a regular basis and wish to pay for that service with cross-border direct debit should not be denied that possibility on the grounds that the account through which the payment is made is located in another Member State.

It is important to stress that a case by case assessment of practices is always required to determine whether a practice is allowed or not. Competent authorities enforcing this provision will need to take into account all the circumstances surrounding the service provision, such as the situation of the recipient, the characteristics of the market concerned and the size of the service provider.

13. What are the Points of Single Contact?

Points of Single Contact (PSCs) are designed to give entrepreneurs access to up-to-date information on the procedures they need to comply with when setting up a business or providing a service on a cross-border basis. They should also enable entrepreneurs to complete the procedures online. They are a single gateway for businesses to interact with national administrations when setting up or conducting their business. PSCs can improve the business environment significantly, as they aim to change the way in which public authorities interact with businesses by bringing paper-based systems online. They can be accessed by domestic and foreign businesses alike and Member States are encouraged to provide multilingual information. There is a central website at EU level at http://ec.europa.eu/internal_market/eu-go/index_en.htm.

14. How far along are Member States with the Points of Single Contact?

All Members States have set up their PSCs. However the degree of development and sophistication differs substantially between different PSCs across the EU. Significant efforts are still required from many Member States to make their PSCs fully operational. Although a large proportion of the required information for the most important service sectors is provided by the PSCs, many procedures are not yet online and the possibilities for electronic completion of procedures are limited in many Member States (only around 24% of procedures can be completed online). This is even more challenging for cross-border completion of procedures. In short, entrepreneurs consider that PSCs do not yet fully meet their needs. Furthermore, the level of awareness among businesses does not appear to be sufficient.

The Commission has carried out an assessment of the state of play of the PSCs and has established three broad categories: the most advanced PSCs are in Denmark, Estonia, Spain, Luxembourg, Netherlands, Sweden and the UK, the most problematic are in Bulgaria, Greece, Ireland, Romania, and Slovenia, the rest are in the middle ground.

The figure below illustrates the Commission's assessment of the overall performance of the PSCs:

The Commission Communication highlights the necessity of making the PSCs fully functional. This is the obligation of the Member States and should have been achieved at the end of the transposition period of the Directive in December 2009. The Commission will, together with Member States, establish a set of common criteria for the second generation of PSCs in the form of a “PSC Charter” (PSCs covering all procedures of a business lifecycle, be multilingual and more user-friendly). The Commission will also launch a communication campaign on PSCs in 2013 and engage with business organisations to make businesses more aware of the possibilities offered by the PSCs and promote their use.

15. What is the performance check exercise and what are the results?

The performance check aimed to identify how different EU Internal Market rules are applied on the ground. It was carried out based on three scenarios in the construction, business services and tourism sectors. When performing the exercise the perspective of businesses was taken into account in order to identify barriers faced by companies and professionals in their day-to-day activities. The exercise was therefore not limited to verifying the implementation of the Services Directive but included other rules that would apply to the businesses in the sectors assessed in the scenarios.

The exercise has showed that service providers still face a multitude of barriers when moving outside their national borders. These barriers often result from the lack of full and compliant implementation of internal market directives (e.g. Services Directive, Professional Qualifications Directive, E-Commerce Directive). Further challenges arise due to issues going beyond the implementation of existing directives: the heterogeneity of the regulation of professional qualifications, requirements limiting the choice of corporate structures for certain professional activities, difficulties in obtaining insurance for cross-border providers or challenges emerging from the lack of sufficient harmonization of consumer protection rules which render selling throughout Europe more difficult.

A number of actions proposed in the Communication are based on the results of the performance check exercise and aim to respond to the identified shortcomings.